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Instant Analysis: Verizon Introduces Sponsored Data

By Evan Niu, CFA - Jan 19, 2016 at 3:30PM

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Verizon follows AT&T with a way for content providers to pay for your data bill.

What happened?
Dominant wireless carrier Verizon (VZ 1.78%) has announced that it is launching a new sponsored data service called FreeBee Data, where content providers can foot the bill for data used by consumers to view related content.

There are two aspects of FreeBee Data. FreeBee Data 360 allows content provider to pay for the data, either within an app or mobile website, which is billed on a per gigabyte pricing structure. There is another service where content providers can pay when do consumers perform specific actions, and are billed on a per-click basis.

FreeBee Data 360 is starting as a beta today and the service is being tested on 1,000 test subscribers at first. Broader commercial availability of the pay-per-click offering is expected later this year.

Does it matter?
The new plan strongly resembles AT&T's (T 2.22%) Sponsored Data program that it launched a few years ago. But uptake seemed to be modest among content providers. A year after the program launched, Ma Bell said that it only had 10 pilot customers. That was a year ago, and AT&T hasn't said much about the program's progress since then.

Both Sponsored Data and FreeBee Data raise concerns about net neutrality, since larger content providers can incentivize users to access their content without using their data. That could potentially put smaller content providers at a distinct disadvantage. However, content providers may be averse to signing up because the costs could soar very quickly, particularly when it comes to streaming video content. It may not be economically feasible to sponsor all of that content, which is probably good news for net neutrality advocates.

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Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$49.04 (1.78%) $0.86
AT&T Inc. Stock Quote
AT&T Inc.
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